California Punitives by Horvitz & Levy

  • California Court of Appeal reverses nonsuit of punitive damages claim (Air Combat v. City of Fullerton)

    This unpublished opinion reverses a trial court’s ruling that a plaintiff failed to present sufficient evidence to warrant a jury instruction on punitive damages.

    A tenant at the municipal airport in Fullerton got into a dispute with the city over the extension of its lease.  The tenant vacated the premises and, in the process, removed not only furniture but also cabinetry, windows, walls, sliding glass doors, a staircase, and plumbing fixtures. The city sued for conversion and sought punitive damages, but the trial court refused to instruct the jury on the issue of punitive damages, concluding that the city had failed to present any evidence of malice.

    The Court of Appeal (Fourth District, Division Three) reversed, holding that even without any direct evidence of malice, a jury could infer malice from the tenant’s conduct.  The court acknowledged that a jury might conclude that the tenant’s actions were the result of mere negligence or an honest mistake about the lease’s requirement to return the premises to their pre-lease condition.  But the court said a jury might also infer that the tenant intentionally removed or destroyed the property with malice in retaliation for the City’s refusal to extend the lease.

    The court’s analysis is in tension with published cases holding that punitive damages, because they are subject to the clear and convincing standard of proof, require evidence that is inconsistent with the possibility of mere negligence or honest mistake.  See, for example, Food Pro v. Farmers Insurance Exchange.  This opinion does not mention or attempt to distinguish that line of authority.

  • In the first opinion after the Supreme Court’s decision in Conservatorship of O.B., Court of Appeal rejects substantial evidence argument and partially reinstates $15.6 million punitive damages award (King v. U.S. Bank)

    In this published opinion, the Third Appellate District restores millions of dollars in both compensatory and punitive damages that the trial court had stricken from a jury’s verdict in an employment dispute.

    Plaintiff King was a senior vice president at a bank. He gave bad performance reviews to two of his subordinates, who then turn accused him of gender discrimination, harassment, and falsification of records. The bank’s human resources director investigated and recommended that King be fired. When the bank fired him, he sued it for defamation, based on statements made by bank employees during the HR investigation. He also sued for wrongful termination, alleging that the bank’s human resources director conducted an inadequate investigation.
    A jury awarded King $8.5 million in compensatory damages and $15.6 million in punitive damages. The trial court partially granted the bank’s post-trial motions, refusing to vacate the award but chopping the compensatory damages down to $2.7 million and then limiting the punitive damages to the same amount. Both sides appealed.
    The bank argued that King failed to prove by clear and convincing evidence that any officer, director, or managing agent of the bank acted with malice. The Court of Appeal acknowledged that, under the Supreme Court’s decision earlier this week in Conservatorship of O.B., appellate courts must take the “clear and convincing” evidence standard into account when reviewing the sufficiency of the evidence supporting a punitive damages award. Although the Court of Appeal acknowledged that standard, it also stated that it did not matter that the conduct at issue could just as easily have been mere negligence, rather than malice. That statement seems incongruous with O.B. and with prior caselaw holding that evidence of malice cannot be clear and convincing if the evidence merely supports an inference of malice, but is also consistent with the possibility of mere negligence.
    Although the court affirmed the jury’s malice finding, the court also agreed with the trial court that the jury’s punitive damages award was excessive, and that a one-to-one ratio is the constitutional maximum under the circumstances of this case. However, because the court reversed the trial court’s rulings with respect to the compensatory damages and reinstated the jury’s $8.5 million compensatory damages award, application of the one-to-one ratio on appeal resulted in an $8.5 million punitive damages award, much higher than the $2.7 million maximum that the trial court had imposed.
    This opinion, if viewed as a test for how appellate courts will apply the new O.B. standard, suggests that O.B. may not move needle much in some courts. This opinion was clearly written well before O.B. was decided. When the Supreme Court issued its opinion in O.B. on Monday, the Court of Appeal proceeded to publish this opinion the very next day, adding a few citations to O.B. but otherwise not apparently seeing a need to take any additional time to revisit its analysis. Of course this is just one data point. It will take several more decisions before we can really measure the impact of O.B.

  • California Supreme Court confirms that clear and convincing evidence standard applies on appeal (Conservatorship of O.B.)

    Today the California Supreme Court settled a long-running split of authority that we have blogged about often.  In Conservatorship of O.B., the Supreme Court clarified that the clear and convincing evidence standard applies on appeal, and does not “disappear” during appellate review, as some opinions had mistakenly held.

    To recap the issue, most facts in civil cases must be proved by a preponderance of the evidence, which means that the fact is more likely than not to be true.  But for certain facts, California law requires proof by clear and convincing evidence, which is a higher burden, and requires evidence that is “so clear as to leave no substantial doubt” and “sufficiently strong to command the unhesitating assent of every reasonable mind.”  (See In re Angelia P.)

    The clear and convincing evidence standard applies to the facts necessary for an award of punitive damages.  (See Civil Code section 3294, subdivision (a).)  It also applies to the facts necessary for establishing a conservatorship, which was the issue in the O.B. case.  The trial court in O.B. concluded that a conversatorship was warranted for a woman with autism.  She appealed, challenging the sufficiency of the evidence.  The Court of Appeal, in reviewing the evidence, ignored the clear and convincing evidence standard, reasoning that the standard applies only in the trial court but not on appeal.  As we have reported here, several other Court of Appeal opinions have taken that same approach (usually in unpublished opinions), often without acknowledging contrary authority holding that appellate courts must consider the higher standard of proof when evaluating the sufficiency of the evidence.

    The Supreme Court granted review to resolve the split of authority.  The conservators tried to rely on legislative history to defend the Court of Appeal’s approach.  They argued that when the Legislature adopted the clear and convincing standard for conservatorship cases, it did so against a backdrop of “150 years of consistent precedent” from the Supreme Court of California squarely holding that the clear and convincing evidence standard applies only to the trial court, and disappears on appeal.

    The problem with that argument was that it rested on a false premise about “150 years of consistent precedent.” As the O.B. opinion explains (and as our firm pointed out in an amicus brief), the Supreme Court had issued conflicting statements on the issue over the years, so there is no basis to infer that the Legislature adopted the conservators’ view, which is actually a minority view in the case law in California and elsewhere.

    After examining the issue thoroughly, the Supreme Court concluded that “logic, sound policy, and precedent all point toward the same conclusion: When reviewing a finding made pursuant to the clear and convincing standard of proof, an appellate court must attune its review for substantial evidence to the heightened degree of certainty required by this standard.”  Accordingly, the Supreme Court reversed the Court of Appeal and disapproved the line of cases holding that the clear and convincing evidence standard disappears on appeal.

    So how will this actually work in practice?  Does this mean that an appellate court can now reweigh the evidence and reevaluate the credibility of the witnesses when deciding whether the evidence was sufficient to meet the higher standard of proof?  No.  The Supreme Court explains (my emphasis in bold):

    When reviewing a finding that a fact has been proved by clear and convincing evidence, the question before the appellate court is whether the record as a whole contains substantial evidence from which a reasonable factfinder could have found it highly probable that the fact was true. In conducting its review, the court must view the record in the light most favorable to the prevailing party below and give appropriate deference to how the trier of fact may have evaluated the credibility of witnesses, resolved conflicts in the evidence, and drawn reasonable inferences from the evidence. 

    The Supreme Court’s opinion makes clear that Courts of Appeal should take this approach in any case where the clear and convincing evidence standard applies, including punitive damages cases.

  • Court of Appeal affirms order that vacated $340 million punitive damages award against Johnston & Johnson (Echeverria v. Johnson & Johnson)

    Two years ago a Los Angeles jury awarded $417 million, including $347 million in punitive damages, to a woman who claimed she developed ovarian cancer from talc in Johnson & Johnson’s Baby Powder.  The trial court tossed out the punitive damages award, finding that the plaintiffs presented no clear and convincing evidence of malice, fraud, or oppression.

    A few days ago, the Court of Appeal (Second District, Division Three) issued this published opinion affirming the trial court’s ruling on punitive damages.  It’s an important decision because it deals with a factual scenario that arises frequently in California punitive damages litigation.  The basic facts go something like this:

    A manufacturer sells a product at a time when someone has posited that an ingredient in the product may increase the risk of cancer, but the issue is a question of scientific debate.  The plaintiff uses the product and develops cancer, and seeks punitive damages from the manufacturer on theory that it consciously disregarded a possible risk to human health.

    The Court of Appeal explains that such evidence cannot support punitive damages, which must be based on a showing that the defendant was aware of probable dangerous consequences of its conduct.  For punitive damages purposes, it is not enough that someone somewhere identified a possible risk from the defendant’s product.  If the scientific community had not reached agreement on whether there was an actual risk, then the defendant did not act with malice by selling the product.

    So in this case, where the connection between talc and ovarian cancer remains under scientific investigation, the Court of Appeal said the jury could have reasonably concluded the defendant was negligent, but no reasonable jury could find by clear and convincing evidence that the defendant committed the sort of “despicable” conduct that warrants punitive damages.

    Significantly, the court explained that scientific studies issued after the plaintiff’s injury could not be used to prove the defendant’s state of mind before the product was sold.  “Scientific evidence developed post-injury did not create a reasonable inference that [the defendant] was acting with malice, pre-injury, in failing to warn of probable dangerous consequences of the product.”

    While it may seem obvious that studies released in 2013 cannot shed light on a defendant’s state of mind in the 1960s, California case law on this issue has been somewhat unclear.  This decision may help dispel some of that confusion.

  • Court of Appeal affirms order that vacated $340 million punitive damages award against Johnston & Johnson (Echeverria v. Johnson & Johnson)

    Two years ago a Los Angeles jury awarded $417 million, including $347 million in punitive damages, to a woman who claimed she developed ovarian cancer from talc in Johnson & Johnson’s Baby Powder.  The trial court tossed out the punitive damages award, finding that the plaintiffs presented no clear and convincing evidence of malice, fraud, or oppression.

    A few days ago, the Court of Appeal (Second District, Division Three) issued this published opinion affirming the trial court’s ruling on punitive damages.  It’s an important decision because it deals with a factual scenario that arises frequently in California punitive damages litigation.  The basic facts go something like this:

    A manufacturer sells a product at a time when someone has posited that an ingredient in the product may increase the risk of cancer, but the issue is a question of scientific debate.  The plaintiff uses the product and develops cancer, and seeks punitive damages from the manufacturer on theory that it consciously disregarded a possible risk to human health.

    The Court of Appeal explains that such evidence cannot support punitive damages, which must be based on a showing that the defendant was aware of probable dangerous consequences of its conduct.  For punitive damages purposes, it is not enough that someone somewhere identified a possible risk from the defendant’s product.  If the scientific community had not reached agreement on whether there was an actual risk, then the defendant did not act with malice by selling the product.

    So in this case, where the connection between talc and ovarian cancer remains under scientific investigation, the Court of Appeal said the jury could have reasonably concluded the defendant was negligent, but no reasonable jury could find by clear and convincing evidence that the defendant committed the sort of “despicable” conduct that warrants punitive damages.

    Significantly, the court explained that scientific studies issued after the plaintiff’s injury could not be used to prove the defendant’s state of mind before the product was sold.  “Scientific evidence developed post-injury did not create a reasonable inference that [the defendant] was acting with malice, pre-injury, in failing to warn of probable dangerous consequences of the product.”

    While it may seem obvious that studies released in 2013 cannot shed light on a defendant’s state of mind in the 1960s, California case law on this issue has been somewhat unclear.  This decision may help dispel some of that confusion.

  • Court of Appeal affirms $1M in punitive damages and furthers split of authority on clear-and-convincing standard of proof (Mazik v. Geico)

    This published opinion is a likely candidate for California Supreme Court review.

    This is an insurance bad faith case in which a jury awarded compensatory damages of $313,508 and punitive damages of $4 million against GEICO for unreasonably failing to pay its policyholder the policy limits of $50,000 under an underinsured motorist policy.  The trial court reduced the punitive damages to $1 million.  GEICO appealed only the punitive damages award.

    GEICO argued that evidence was insufficient to to show that any managing agent of GEICO participated in or authorized an act of malice, fraud, or oppression, as required by Civil Code section 3294.

    The Court of Appeal (Second District, Division Two) began its analysis by considering whether the clear-and-convincing standard of proof affects appellate review of the sufficiency of the evidence.  As we have noted, California’s appellate courts have split on this issue and the California Supreme Court recently granted review to resolve the split. 

    The Court of Appeal here decided to disregard the clear-and-convincing standard for purposes of  appellate review.  In so doing, the court cited a 1973 Supreme Court opinion (Crail v. Blakely), but did not discuss some of the more recent cases or acknowledge that the issue is currently pending before the Supreme Court.

    The court’s decision on the standard of review issue appears to be pivotal to its analysis of the merits.  The court concluded that the plaintiff’s evidence was sufficient, based in large part on inferences that the jury might have drawn from equivocal evidence.  For example, the court discussed evidence that claims adjusters at GEICO, who were not managing agents, cherry-picked evidence from the plaintiff’s medical files to justify their decision not to pay his claim.  They prepared evaluations that minimized the plaintiff’s injuries, while ignoring evidence to the contrary.  There was no direct evidence, however, that GEICO’s managing agent (a regional liability administrator) knew about the information that the adjusters omitted from their reports.  The Court of Appeal concluded, however, that the jury could have inferred the managing agent’s knowledge of that information based on evidence that he had “more than a passing familiarity” with the claim. 

    Had the Court of Appeal taken the clear-and-convincing evidence requirement into account, it might have reached a different conclusion.  Cases applying that standard have held that equivocal evidence is not sufficient to qualify as clear and convincing—when the evidence is equally consistent with ordinary negligence as with malice, the plaintiff has failed to show malice by clear and convincing evidence.

    There’s a good chance that if GEICO petitions the California Supreme Court for review, the court will grant review and decide it along with the currently pending case on this issue (or hold this case pending the resolution of the other case).

  • Court of Appeal affirms $1M in punitive damages and furthers split of authority on clear-and-convincing standard of proof (Mazik v. Geico)

    This published opinion is a likely candidate for California Supreme Court review.

    This is an insurance bad faith case in which a jury awarded compensatory damages of $313,508 and punitive damages of $4 million against GEICO for unreasonably failing to pay its policyholder the policy limits of $50,000 under an underinsured motorist policy.  The trial court reduced the punitive damages to $1 million.  GEICO appealed only the punitive damages award.

    GEICO argued that evidence was insufficient to to show that any managing agent of GEICO participated in or authorized an act of malice, fraud, or oppression, as required by Civil Code section 3294.

    The Court of Appeal (Second District, Division Two) began its analysis by considering whether the clear-and-convincing standard of proof affects appellate review of the sufficiency of the evidence.  As we have noted, California’s appellate courts have split on this issue and the California Supreme Court recently granted review to resolve the split.

    The Court of Appeal here decided to disregard the clear-and-convincing standard for purposes of  appellate review.  In so doing, the court cited a 1973 Supreme Court opinion (Crail v. Blakely), but did not discuss some of the more recent cases or acknowledge that the issue is currently pending before the Supreme Court.

    The court’s decision on the standard of review issue appears to be pivotal to its analysis of the merits.  The court concluded that the plaintiff’s evidence was sufficient, based in large part on inferences that the jury might have drawn from equivocal evidence.  For example, the court discussed evidence that claims adjusters at GEICO, who were not managing agents, cherry-picked evidence from the plaintiff’s medical files to justify their decision not to pay his claim.  They prepared evaluations that minimized the plaintiff’s injuries, while ignoring evidence to the contrary.  There was no direct evidence, however, that GEICO’s managing agent (a regional liability administrator) knew about the information that the adjusters omitted from their reports.  The Court of Appeal concluded, however, that the jury could have inferred the managing agent’s knowledge of that information based on evidence that he had “more than a passing familiarity” with the claim.

    Had the Court of Appeal taken the clear-and-convincing evidence requirement into account, it might have reached a different conclusion.  Cases applying that standard have held that equivocal evidence is not sufficient to qualify as clear and convincing—when the evidence is equally consistent with ordinary negligence as with malice, the plaintiff has failed to show malice by clear and convincing evidence.

    There’s a good chance that if GEICO petitions the California Supreme Court for review, the court will grant review and decide it along with the currently pending case on this issue (or hold this case pending the resolution of the other case).

  • Supreme Court of California grants review to resolve split over application of “clear and convincing” evidence standard

    As reported on our sister blog, At the Lectern, the Supreme Court has finally agreed to settle a long-running split of authority about how the clear and convincing evidence standard applies, if at all, on appeal.

    The issue has great importance for punitive damages cases because, as readers of this blog are
    aware, California plaintiffs must prove all the prerequisites for a punitive damages award by clear and convincing evidence.   (See Civil Code section 3294.)

    As we have discussed in the past, our appellate courts do not agree about whether they should take the heightened standard of proof into account when reviewing the sufficiency of the plaintiffs’ evidence.  Many courts say yes, but others have said no.

    The Supreme Court has furthered the confusion by seeming to take both sides of the debate.  (Compare Crail v. Blakely [holding that clear and convincing standard was adopted only “for the edification and guidance of the trial court”] with In re Angelia P. [holding that the clear and convincing evidence standard is incorporated into the substantial evidence standard on appeal].)

    The Supreme Court actually granted review to address this issue over a decade ago. But the parties settled that case and the issue became moot.  In the years since, many other petitions raised the issue, but the Supreme Court consistently denied them.  Now, finally, in Conservatorship of O.B., the Supreme Court has agreed to take the issue up again.  With any luck, the parties to that case will not reach a settlement.

  • Supreme Court of California grants review to resolve split over application of “clear and convincing” evidence standard

    As reported on our sister blog, At the Lectern, the Supreme Court has finally agreed to settle a long-running split of authority about how the clear and convincing evidence standard applies, if at all, on appeal.

    The issue has great importance for punitive damages cases because, as readers of this blog are
    aware, California plaintiffs must prove all the prerequisites for a punitive damages award by clear and convincing evidence.   (See Civil Code section 3294.)

    As we have discussed in the past, our appellate courts do not agree about whether they should take the heightened standard of proof into account when reviewing the sufficiency of the plaintiffs’ evidence.  Many courts say yes, but others have said no.

    The Supreme Court has furthered the confusion by seeming to take both sides of the debate.  (Compare Crail v. Blakely [holding that clear and convincing standard was adopted only “for the edification and guidance of the trial court”] with In re Angelia P. [holding that the clear and convincing evidence standard is incorporated into the substantial evidence standard on appeal].)

    The Supreme Court actually granted review to address this issue over a decade ago. But the parties settled that case and the issue became moot.  In the years since, many other petitions raised the issue, but the Supreme Court consistently denied them.  Now, finally, in Conservatorship of O.B., the Supreme Court has agreed to take the issue up again.  With any luck, the parties to that case will not reach a settlement.

  • Published opinion exacerbates split over application of clear-and-convincing evidence standard on appeal (Morgan v. Davidson)

    This published opinion may cause the California Supreme Court to finally settle a long-simmering split of authority.

    The issue in question is whether appellate courts should consider the clear-and-convincing evidence standard of proof when reviewing the sufficiency of the evidence to support a punitive damages award.

    By statute, California plaintiffs must prove all the prerequisites for a punitive damages award by clear and convincing evidence.  When a defendant challenges a punitive damages award on appeal, arguing that the plaintiff failed to meet the burden of proof, appellate courts often take the heightened standard of proof into account, and ask whether a reasonable factfinder could have found that plaintiff’s evidence amounted to clear and convincing proof of malice, oppression, or fraud. (See, e.g. Shade Foods v. Innovative Products [“since the jury’s findings were subject to a heightened burden of proof, we must review the record in support of these findings in light of that burden . . . . we must inquire whether the record contains substantial evidence to support a determination by clear and convincing evidence’ “]; Pfeifer v. John Crane [“we review the evidence in the light most favorable to the Pfeifers, give them the benefit of every reasonable inference, and resolve all conflicts in their favor, with due attention to the heightened standard of proof”].)

    Some courts have concluded, however, that the clear-and-convincing standard applies only in the trial court and “disappears” in the Court of Appeal.  As we have observed, that view is supported by some older opinions and continues to pop up in unpublished decisions.

    Earlier this year, Division Four of the First Appellate District attempted to put and end to the notion that the clear-and-convincing evidence standard disappears on appeal.  T.J. v. Superior Court explained why it is important for appellate courts to take the heightened standard of proof into account:

    If the clear and convincing evidence standard “disappears” on appellate review, that means the distinction between the preponderance standard and the clear and convincing standard imposed by statute is utterly lost on appeal, an outcome we believe undermines the legislative intent as well as the integrity of the review process. . . . If that standard is ignored on appeal, the heightened standard of proof . . . loses much of its force, or at least the ability of the appellate court to correct error is unacceptably weakened.

    We hoped that would put an end to the debate, but yesterday Division Two of the Fourth Appellate District reached the opposite conclusion and embraced the older cases holding that the higher standard of proof disappears.  The court did not cite the T.J. v. Superior Court opinion, but did acknowledge some of the other recent decisions that applied the clear-and-convincing standard on appeal.  The court rejected these cases as inconsistent with Supreme Court precedent, citing Crail v. Blakely, a 1973 decision in which the Supreme Court indicated outside the punitive damages context that the clear and convincing standard was adopted only “for the edification and guidance of the trial court.” 

    The court failed to recognize, however, that the Supreme Court has held otherwise, more recently, in the punitive damages context.  The Supreme Court’s decision in In re Angelia P. adopted the view that the clear and convincing evidence standard is incorporated into the substantial evidence standard on appeal.  And the Supreme Court has continued to follow that approach in more recent decisions in other contexts.  (See Conservatorship of Wendland (2001) [“The ‘clear and convincing evidence’ test requires a finding of high probability . . . we ask whether the evidence [on the issue before the court] has that degree of clarity”]; Estate of Ford (2004) [finding that certain testimony “was not clear and convincing evidence” on the issue of equitable adoption].)

    We can only hope that the Supreme Court will grant review to sort this out.  The Supreme Court actually attempted to do that a decade ago.  In an unpublished decision, Harvey v. Sybase, the Court of Appeal took the same position as the Court of Appeal here (i.e., that the clear-and-convincing standard disappears on appeal), and the Supreme Court granted review to address that issue.  But the parties settled that case and the issue became moot.  Perhaps the defendant in this case will seek review, providing the Supreme Court with another opportunity to take up the issue.